RP growth seen at slower 2.5% in 2009

MANILA, Philippines - Economists see the country’s growth slowing down to 2.5 percent this year, despite the surprisingly strong performance in 2008, weighed down by declining remittances that has consistently funded domestic consumption.

Global Source said in its latest quarterly outlook that seasonally adjusted growth showed a steadily declining trend in 2008, indicating a weakening pace, while leading economic indicators now point to an economic deceleration.

According to Global Source’s Romeo Bernardo, domestic demand would be widespread this year and the deterioration in external demand would also escalate as economies worldwide start to contract.

“We are now looking at full-year GDP growth of about 2.5 percent, with abundant downside risks given the alarmingly rapid decline in global outlook,” Bernardo said in a paper written with economist Margarita Gonzales.

Bernardo and Gonzales’ observation was broadly in line with previous readings made by the International Monetary Fund (IMF) which pegged the country’s growth this year at 2.25 percent.

“The country will not be immune to the global financial crisis, but it will not be falling into a recession either, from our current viewpoint,” Bernardo said, giving credit to financial reforms that he said partly explained the country’s stable macro-economics.

But Bernardo and Gonzales cautioned that even the expected slowdown in price increases and the depreciation of the peso would not be enough to offset people’s tendency to not spend.

Bernardo said consumers were edgy over the dimming prospects in employment both here and abroad and with remittances also expected to slow down, people would prefer to hold on to their cash.

Global Source projected the growth in remittances to either be flat or even negative although Bernardo said it would happen with a lag so that inflows early this year would still be positive.

For one, Bernardo and Gonzales said deployment of workers abroad was actually still growing over 20 percent in 2008 and this suggested a steady increase in remittances.

But Bernardo said the top destinations for the country’s overseas workers face increasingly tough times, a development that raised the possibility of joblessness for Filipinos already working abroad.

“The US may well be in its nastiest post-war recession, while countries in the Middle East find themselves battered by a steep drop in world oil prices and sharp losses on sovereign wealth funds,” Bernardo said.

Fortunately, Bernardo and Gonzales said majority of Filipinos in the US were employed in recession-proof sectors such as healthcare and education. Moreover, huge reserves built up through the years coupled by political economy considerations could help prevent a mothballing of big-ticket projects in the Middle East.

In the domestic job market, Global Source said the outlook might actually be worse, with the export sector hardest hit by slowing global demand. “We see unemployment easily rising to about 7.9 percent this year,” Bernardo said.